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SPECIAL REPORT

SPECIAL REPORT

CHINA AND ENERGY

 In 2004 China consumed 2.17 trillion kilowatt hours (kWh) of electricity, with consumption projected to rise 4.3 percent per year until 2025.

 China became the second-largest petroleum consumer in 2003. In 2004 it had a total demand of 6.5 million barrels per day (bpd). The U.S. Energy Information Administration (EIA) predicts consumption will reach 14.2 million bpd by 2025.

 Coal comprises 65 percent of China's primary energy consumption. In 2003, 1.53 billion short tons, or 28 percent of the world total, was consumed by China. The EIA predicts growth in consumption will average 6.2 percent per year from 2002- 2005.

 Natural gas currently accounts for only around 3 percent of total energy being consumed in China, but consumption is expected to nearly double by 2010.

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(CNN) -- They could be the names of the family next door: Katrina, Larry, Rita, Jolina and Glenda.

But as the call-signs of some of the most devastating hurricanes, typhoons and cyclones the world has seen in the past 12 months, they are just one manifestation of a global weather system that seems in destructive disarray.

From floods and drought in China, landslides in the Philippines, blizzards across Europe, wildfires in the Americas, vanishing islands in the Pacific, and melting polar icecaps, the environment in 2006 is far from benign.

According to a host of environmental experts, much of the turmoil can be blamed on climate change -- for which, read global warming, greenhouse gases and human energy consumption on a massive, rising scale.

The United States is the world's biggest energy consumer and by far the biggest polluter, with per-capita carbon emission rates many times those of developing countries such as China and India.

But it is the high economic growth rates of these two countries -- 8 percent to 10 percent this year for China and about 7 percent to 8 percent for India -- that is cause for concern.

With populations of 1.3 billion and 1.1 billion respectively, how much and what sort of energy they consume over the next few decades will be a key determinant of the earth's health.

Other countries matter, of course: Japan, South Korea, the key European economies of Germany, France, the UK and Italy. Russia's energy consumption also matters, as well as the keeper of the world's biggest forestry resource, Brazil.

But British Prime Minister Tony Blair put it succinctly this week: "It is a completely unrealistic debate to say that you can have a climate-change agreement that doesn't involve China, America and India."

For its part, China has pledged to cut its per-capita energy consumption 20 percent by 2010. Its new five-year economic plan, agreed in mid-March, calls for greater energy efficiency and a more environmentally responsible approach to growth, even if it means slowing down a little.

President Hu Jintao repeated that theme when he addressed the Chinese Communist Party's central committee politburo in Beijing on March 27. According to state-run Xinhua news agency, Hu stressed that economic and social progress could not be achieved at the price of people's lives or the destruction of the environment.

But the reality is that much of China's industry is dirty, the air above its biggest cities is heavily polluted and its energy consumption is just at the beginning of the growth curve.

Whether industries clean up or not, as standards of living rise, so too will China's energy use. The International Energy Agency expects China's power consumption to double between now and 2025.

According to the IEA, fossil fuels (coal, oil and natural gas) will account for almost 90 percent of the growth in global energy demand between now and 2030.

In its 2005 World Energy Outlook, the IEA says that China and India alone will account for more than 70 percent of the growth in global coal consumption.

At the same time, global emissions will grow 50 percent, with the emissions from developing countries (such as China and India) overtaking emissions from the OECD advanced economies in the 2020s.

Without a massive cleanup, the fear is that the world's environment will be in sorry shape, reflected in volatile weather patterns and declining habitat. The response from some in the developing world is that the West has already enjoyed its high-growth phase and is in no moral position to dictate energy policies to other countries.

Global agreement

That has not deterred Blair, who has named the battle against global warming one of his 2006 priorities. He has just called for a global agreement that will pick up where the Kyoto Protocol -- which sets emission targets for advanced economies such as Japan and the EU -- leaves off in 2012.

Speaking in Auckland, New Zealand on March 29, Blair told a climate change conference the world couldn't wait five years to conclude a new agreement.

"We've got to do it much more quickly than that."

China and India are signatories to the Kyoto Protocol, but as developing economies are not bound by it. The United States and Australia -- the two industrialized countries with the highest per-capita carbon dioxide emissions -- have refused to sign onto Kyoto, arguing that while they support its targets, it is not an effective framework and they will not put their economies and jobs at risk because of it.

But it is not all gloom on the international front. One example of greater energy cooperation between developed and developing economies occurred in January, when Australia hosted the first Asia-Pacific Partnership on Clean Development and Climate conference. It brought together the six Asia-Pacific countries that use almost half the world's energy: the United States, Japan, South Korea, China, India and Australia.

The conference agreed to work on cleaner coal and more efficient power for energy-intensive industries and pitched itself as a valuable adjunct to the Kyoto process.

The need for this sort of cooperation has never been greater. The world in the next 50 years will consume more energy than the combined total used in all previous history, according to the World Nuclear Association, which pushes nuclear energy as a more sustainable source than coal or oil.

Nuclear option

The nuclear association argues that this requires a huge switch away from fossil fuels to clean energy, and says while renewables such as solar, wind and biomass have a role, only nuclear power stations can deliver this requirement on a massive scale.

China, for example, is looking to quadruple its nuclear energy output by 2020, and aims to ensure uranium supplies through a nuclear cooperation agreement it expects to reach with Australia during the April 1-4 visit there by Premier Wen Jiabao.

Ian Hore-Lacy, general manager of the Melbourne-based Uranium Information Center, told CNN that Australia would be a "natural supplier" to China. He said if China reached its 2020 nuclear energy goal, it would need about 8,000 tonnes of uranium a year, with Australia, Kazahkstan and Namibia as potential sources.

Australia has about 40 percent of the world's known low-cost uranium deposits and is the world's No. 2 producer behind Canada. At the current spot price of $40 a pound, global uranium production in 2004 of slightly more than 40,000 tons was worth about $3.5 billion.

Even so, coal is expected to remain the fuel of choice for China's industrial sector, reflecting power station construction costs and the extensive domestic coal reserves it has.

What Blair wants for a post-Kyoto 2012 world is a new agreement that has the primary goal of stabilizing climate change and cleaning up the environment.

"We've got to create the circumstances in which the investors out there, businesses, financial markets, think this is where the opportunity is going to go," he told a New Zealand press conference on Wednesday, Reuters reported.

Which comes back to an old but still valid maxim for business: there's money in muck.